Buying a leasehold flat to rent

Pixie5740

davidwood681 wrote: »

I agree, but that isn't what you asked

If you say so.

Pixie5740

Mr_Big wrote: »

The area isn't high end to be honest and I am aware that the tenants may be higher risk, but I'm on a budget so can't really go higher than £60k and I intend to interview any potential tenants and see statements to get an idea of what their lifestyle is like etc. I don't think I will accept tenants on benefits. I know the area well so I know there's low crime there and everyone is generally friendly, I've not heard of anyone having issues with rent etc.

You're making the classic mistake of basing your business on the type of property you can afford not the type of property that makes the best rental and will attract the best tenants. Who exactly is your target tenant?

If you won't accept tenants who claim benefits then you're pool of tenants is going to be pretty small. The type of property you are describing is likely to attract those on low incomes i.e. people who claim working tax credits and/or some housing benefit but you've automatically written those people off. You're also discounting pensioners who claim a plethora of benefits even if some of them like to pretend that the state pension, winter fuel allowance, etc aren't benefits even though they are defined in law as a benefits.

Mr_Big wrote: »

When I say buying the freehold I mean owning the property and the land. From what I've read, it's better to own the freehold too cause then you're not forced to pay expensive charge fees as and when. But if insurance doesn't cover these kinds of things, I kind of wonder now if staying leasehold and just extending the lease is not actually a bad idea?

You guys have been great, thanks.

Is a share of the freehold also for sale or is it the freehold to the entire building that's for sale? Mind you if £60k is your maximum total budget the chances of you being able to afford even a share of the freehold are diddly squat.

Why don't you use your money in combination with a mortgage to purchase a home that you will like living in?

Cakeguts

If something has been reduced from £70k because they can't sell it, it isnt in a popular area. If it isn't in a popular area then you are not going to get good tenants because they don't rent in bad areas. You say you can get £450pcm which sound doubtful to me I would like to suggest around £300pcm with a huge risk that the tenants will wreck the flat causing more damage than the value of the deposit. There is also the risk that they won't pay the rent. You will not get a choice of tenant you will have to take anyone you can get.



Cheap properties are cheap because they are in areas where people choose not to live unless they really can't afford anything better. Your tenants will also only want to live there because they can't get anything better. The kind of tenants who can't get anything better are often the ones who have already been evicted for non payment of rent or anti social behaviour.

[Deleted User]

It might not be as black as other posters have said but I'd certainly be wondering why it has already been reduced by more than 10%, and probably not expecting (however hopefully) to reduce by even more. That would mean the flat would be reduced by about 35% plus lol. That in itself would be enough to make me walk away. There has to be a problem if rentals are so popular in that area as you say. Normally such purchases would also be very popular.

Find the proper land registry website and get hold of the lease. Make sure the lease allows the property to be rented out as well as how long is left on the lease. Don't engage solicitors/surveyors until you have thoroughly looked through the lease, just in case the reason for the price is something to do with the lease.

Pixie5740

Good point deanna, the lease might not allow the property to be rented out which is why other landlords haven't snapped it up to get a 10%+ gross yield.

Mr_Big

You guys have given me a lot more to think about, so thanks for all the responses.

Thanks for showing me the right land registry site! Can't believe I fell for such a rookie mistake, I mean I know I am a rookie to this but still that was sloppy on my own behalf. I'll order the lease tonight or tomorrow.

Ok so I've just got in touch with the estate agent to just get a rough idea of what I'm dealing with here. They say there's 103 years remaining on the lease (winning!). Ground rent is £10 per annum. They're unsure of the service charge, they think it's £200 - £300 per annum but said they will find out and get back in touch. They're also unsure if I can rent it so they will also be in touch about that information.

In all honesty, the price etc. Has surprised me too, I mean looking at the property and seeing the price, I don't get how it hasn't been snapped up already. You know the saying if something seems too good to be true..?

I will quickly explain the reason for the sale though as this may make more sense. A guy bought it for his girlfriend, she lived in it for years but passed away, so the partner (owner) is now looking to sell as he already has a property of his own. I believe that's why he's taking the hit in the sale.

In all honesty I have no idea if the freehold is being offered, I just read that after owning/living in a place for two years you can then request to buy the freehold of the property. This place holds two flats, but as said I don't even know if I could own the freehold now thinking about it as it isn't just my property on the land so that's a new thing to consider.

Well when I say benefits, I mean more JSA to be honest. Am I right in saying that housing benefits can be automatically paid directly into the landlords account? If that's the case I'll have no issues with that.

I mean I'm just going by the properties around the area. And to be honest, where I live and within it's radius, there's rarely properties you can rent for £300. It's generally £400 upwards. My target audience would be a single person or couple as the bedroom easily has space for a double bed. I don't think I would be attracting any couples or people with kids, so I would assume there's a lot less chance of property damage. Am I being naive in believing that it is possible to still get decent tenants if it's not in a higher class/most popular area? I've been around the area for two years and never seen constant moving of people and/or any crime. In all honesty, the flat looks so good I think it would be enough to be attract the right type of tenant. I mean I know I'm a newbie but if the property is in the condition that it looks like (big if) then I do think it could be (emphasising could be here) a great opportunity, but again I hope this isn't just me being naive and possibly flushing money down the drain which of course I cannot afford to do. I've looked at some previous house prices and they have sold for £103k and £107k. The flat I'm looking at was originally bought for £74k in 2005.

Cakeguts

Mr_Big wrote: »

You guys have given me a lot more to think about, so thanks for all the responses.

Thanks for showing me the right land registry site! Can't believe I fell for such a rookie mistake, I mean I know I am a rookie to this but still that was sloppy on my own behalf. I'll order the lease tonight or tomorrow.

Ok so I've just got in touch with the estate agent to just get a rough idea of what I'm dealing with here. They say there's 103 years remaining on the lease (winning!). Ground rent is £10 per annum. They're unsure of the service charge, they think it's £200 - £300 per annum but said they will find out and get back in touch. They're also unsure if I can rent it so they will also be in touch about that information.

In all honesty, the price etc. Has surprised me too, I mean looking at the property and seeing the price, I don't get how it hasn't been snapped up already. You know the saying if something seems too good to be true..?

I will quickly explain the reason for the sale though as this may make more sense. A guy bought it for his girlfriend, she lived in it for years but passed away, so the partner (owner) is now looking to sell as he already has a property of his own. I believe that's why he's taking the hit in the sale.

In all honesty I have no idea if the freehold is being offered, I just read that after owning/living in a place for two years you can then request to buy the freehold of the property. This place holds two flats, but as said I don't even know if I could own the freehold now thinking about it as it isn't just my property on the land so that's a new thing to consider.

Well when I say benefits, I mean more JSA to be honest. Am I right in saying that housing benefits can be automatically paid directly into the landlords account? If that's the case I'll have no issues with that.

I mean I'm just going by the properties around the area. And to be honest, where I live and within it's radius, there's rarely properties you can rent for £300. It's generally £400 upwards. My target audience would be a single person or couple as the bedroom easily has space for a double bed. I don't think I would be attracting any couples or people with kids, so I would assume there's a lot less chance of property damage. Am I being naive in believing that it is possible to still get decent tenants if it's not in a higher class/most popular area? I've been around the area for two years and never seen constant moving of people and/or any crime. In all honesty, the flat looks so good I think it would be enough to be attract the right type of tenant. I mean I know I'm a newbie but if the property is in the condition that it looks like (big if) then I do think it could be (emphasising could be here) a great opportunity, but again I hope this isn't just me being naive and possibly flushing money down the drain which of course I cannot afford to do. I've looked at some previous house prices and they have sold for £103k and £107k. The flat I'm looking at was originally bought for £74k in 2005.

You can have the most fantastic looking flat in a bad area and still not attract good tenants. Tenants choose where they want to live by location. Is this flat an ex council one by any chance?

Mr_Big

Cakeguts wrote: »

You can have the most fantastic looking flat in a bad area and still not attract good tenants. Tenants choose where they want to live by location. Is this flat an ex council one by any chance?

Yeah I understand what you're saying. Well I viewed the property today, I must say, the pics are a little deceiving. Don't get me wrong, it is a nice place, but there's definitely a bit of sprucing up and TLC needed to refresh it a little which the pictures didn't show. The agent said there's no service charge, only the £10 ground rent, is that common? Cause I'm quite baffled by that. It is an ex council property yes, should I be concerned? I've not made an official offer but I wouldn't pay £60k for it at this stage. This may be a silly question, but is it common for estate agents to lie? I'm just wondering if certain things that was said to me was just what I wanted to hear to try and make the sale

Pixie5740

My understanding of properties where the council is the freeholders that there is no sinking fund so major repairs to the building are like Russian Roulette. You might not get hit with a big bill the whole time you own the lease but then again you might not.

Mr_Big

Pixie5740 wrote: »

My understanding of properties where the council is the freeholders that there is no sinking fund so major repairs to the building are like Russian Roulette. You might not get hit with a big bill the whole time you own the lease but then again you might not.

Ahh right ok. Thanks for that information. I can only hope that the government wouldn't want to screw you over in terms of charging for repairs etc. but then I'm probably being naive there lol. I've been cheeky and made an enquiry (not official) offer of £50k, at first it seemed like a no go, but when I mentioned I could do it as a cash sale they seem like it may be accepted. I wouldn't go over £55k but would consider going up to that but I've found another flat which looks nicer, is in a nicer area and is asking for offers over £50k so may get that one cheaper than the original flat. Only thing is, it's further away from the main city centre than the original flat. I'll try and keep you guys updated to give some closure as you have all been so great with responses and help